Question

5. In Year 6, a donor gives $112.000 to a private not-for-profit entity to enable it to buy a new bus for transportation purposes. Near the end of Year 7. this money is used for the stipulated purpose. The donor made no provisions about the accounting for this acquisition. Which of the following is true about the statement of activities for Year 7?

a. Net assets without donor restrictions increased by $112,000.

b. Net assets with donor restrictions did not change.

c. Net assets without donor restrictions did not change.

d. Net assets with donor restrictions goes up by $112,000 and also down by $112.000

6. In Year 6, a donor gives $112,000 to a private not-for-profit entity to enable it to pay the salary of a new doctor to be hired by the organization. Near the end of Year 7, this money is used for the stipulated purpose. Which of the following is true about the statement of activities for Year 7？

a. Net assets with donor restrictions increased by $112,000.

b. Net assets with donor restrictions did not change.

c. Net assets without donor restrictions goes up by $112.000 and also down by $112.000

d. Net assets with donor restrictions goes up by $112.000 and also down by $112.000.

7. The governing board of a private not-for-profit entity votes to set $400,000 in cash aside in an investment fund so that this money and future interest will be available in five years, when a new building is scheduled for construction. Which of the following is not true?

a. The investments are reported on the statement of financial position as net assets without donor restrictions,

b. The acquisition of the investments is not reported on the statement of activities.  

c. Board-designated funds will appear in the net asset section of the week of not as net assets with donor restrictions

d. Income earned by these investments appears on the statement of activities under the out donor restrictions.

8. A private not-for-profit entity receives three large cash donations .

One gift of $70,000 is restricted by the down so that it cannot be spent for four years .

One gift of $90,000 is restricted to pay the salaries of the entity's workers .

One gift of $120.000 must be held forever with the income to be used to provide food for tid families. In the current yeas, income of $10,000 was carved but not spen.

What is the increase in the current year in wet assets with donor restrictions

a. $190,000 b. $210,000 C. $280,000 d. $290,000

9. A private not-for-profit university changes student tuition of $1 million for the current year. Finan cial aid grants total $220,000. The school also receives a $100,000 grant restricted for faculty sala ries. Of that amount, $30,000 is spent appropriately this year. In preparing a statement of activities, which of the following is not true?

a. Net assets without donor restrictions should show an increase of $30,000 for net assets reclassified

b. Net assets without donor restrictions should report revenue of $1 million

c. Net assets without donor restrictions should report expenses of $30.000

d. Net assets without donor restrictions should report a direct reduction of $220.000 in reporting the tuition revenue.

10. Which of the following statements about the reporting of functional expenses is not true!

a. A statement of functional expenses is now required of all private not-for-profit entities. b. Functional expenses are divided between program services and supporting services. c. Functional expenses can be reported as a footnote rather than as a separate statement of func tional expenses.

d. Functional expenses can be reported within the statement of activities rather than as a separate statement of functional expenses.

11. A private not-for-profit entity has the following expenses for the current year.

Research to cure disease $60,000

Fundraising costs 70,000

Work to help individuals with disabilities .... 40,000

Administrative salaries... 90,000

How should the not-for-profit entity report these costs?

a. Program service expenses of $100,000 and supporting service expenses of $160,000

b. Program service expenses of $160,000 and supporting service expenses of $100,000

c. Program service expenses of $170,000 and supporting service expenses of $90,000

d. Program service expenses of $190,000 and supporting service expenses of $70,000

12. A private not-for-profit entity spends $100,000 to send a mailing that solicits donations and pro- vides educational and other information about the charity. Which of the following is true?

a. No part of the $100,000 can be reported as a program service expense.

b. Some part of the $100,000 must be reported as a program service expense.

c. No authoritative guidance exists, so the entity can allocate the cost as it believes best.

d. Under certain circumstances, the entity should allocate a portion of the $100,000 to program service expenses.

13. A private not-for-profit entity sends a mailing to all of its current and former members regardless of whether they have ever donated money or not. The mailing has a total cost of $22,000. It asks for monetary contributions to help achieve the charity's stated mission. In addition, 80 percent of the mailed material is educational in nature, providing information about the entity's goals. Which of the following is true?

a.Some part of the $22000 should be reported as a program service cost because of the educational materials included.

b.No part of the $22000 should be reported as a program service cost because there is no specific call to action.

C. No part of the $22000 should be reported as a program service cost because the mailing was sent to both current and former members regardless of their donation history.

d.Some part of the $22000 should be reported as a program service cost because more than 50 percent of the material was educational in nature.

Answer 1

5:

A

(Because the money has now been spent as designated, a $112,000 reclassification should be shown on the statement of activities that decreases net assets with donor restrictions by $112,000 and increases net assets without donor restrictions by the same amount.)

6:

C

(Because the money has now been spent as designated, a $112,000 reclassification should be shown on the statement of activities to decrease net assets with donor restrictions by $112,000 and increase net assets without donor restrictions by the same amount. Because this money was for a salary, the NFP also reports salary expense of $112,000 as a reduction in the net assets without donor restrictions.)

7:

C

(This money is not donor-restricted. Thus, it remains within the net assets without donor restrictions. The net asset section of the statement of financial position will identify this portion of the net assets without donor restrictions as board designated. (This will not be shown under net assets with donor restrictions which makes C the answer.)

8:

D

(The $70,000 gift is time-restricted. The $90,000 gift is purpose-restricted. The $120,000 gift is permanently-restricted. The $10,000 income is purpose-restricted.)

9:

B

(The school offsets the tuition revenue of $1.0 million with the $220,000 in financial aid for a net revenue of $780,000. Because the university is in charge of providing financial aid, the school is expecting to collect $780,000 and not the $1.0 million that it charged.)

10:

A

(Functional expenses must now be reported by all private NFPs. The format used for this reporting is optional. The NFP can create a separate statement of functional expenses. As an alternative, it can report the information within the statement of activities or as footnote disclosure.)

11:

A

(The cost of the research and the work to help the disabled are program service expenses. The cost of fundraising and administrative salaries are supporting service expenses.)

12:

D

(A portion of the cost of a fundraising solicitation can be deemed program services rather than supporting services if a call for specific action is included and the mailing goes to more than just financial donors.)

13:

B

(A portion of the cost of a fundraising solicitation can be deemed program services rather than supporting services but only if a call for specific action is included and the mailing goes to more than just financial donors.)